Deutsche Bank Sees 3 Reasons To Buy SUPERVALU

Deutsche Bank upgraded

Tuesday from Hold to Buy and raised its price target from $8.50 to $13.00. Analysts led by Karen Short made the upgrade based on the belief that fiscal 2015 and 2016 consensus was too low, the valuation was attractive and the view that positive catalysts were ahead. Discussing consensus numbers, Short projected Q4 2015 EBITDA of $210.7 million which was $4 million above consensus. The firm's FY 2016 EBITDA estimate was $803.8 million and $11 million above consensus. Short highlighted valuation and noted the stock traded at 6.1x the fiscal 2016 EV/EBITDA with a FCF Yield of 11.4 percent. The analyst noted that in "contrast to most names in our coverage universe, SVU's multiple has not expanded in the last several months...despite the fact that fundamentals are at an inflection point." Two catalysts that could drive the shares higher, according to Short, were a shift of EBITDA dollars from retail to distribution "which would increase the sum-of-the-parts valuation by ~$200 million, or $0.75/share" and a potential sale of the retail business "which could generate $1.1 billion in pre-tax proceeds (at a 5x EBITDA multiple)." SUPERVALU recently traded at $10.35, up 1.57 percent.